Monetary Policy And Risk Taking

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Bank Leverage and Monetary Policy's Risk-Taking Channel

Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez
Bank Leverage and Monetary Policy s Risk Taking Channel Book PDF

Author : Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez
Publisher : International Monetary Fund
Page : 41 pages
File Size : 49,6 Mb
Release : 2013-06-06
Category : Business & Economics
ISBN : 9781484381137

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Bank Leverage and Monetary Policy's Risk-Taking Channel by Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez Pdf

We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.

Monetary Policy and Bank Risk-Taking

Mr.Giovanni Dell'Ariccia
Monetary Policy and Bank Risk Taking Book PDF

Author : Mr.Giovanni Dell'Ariccia
Publisher : International Monetary Fund
Page : 23 pages
File Size : 44,7 Mb
Release : 2010-07-27
Category : Business & Economics
ISBN : 9781455253234

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Monetary Policy and Bank Risk-Taking by Mr.Giovanni Dell'Ariccia Pdf

This paper contributes to the current debate on what role financial stability considerations should play in monetary policy decision and how best to integrate macro-prudential and monetary policy frameworks. The paper broadly supports the view that monetary policy easing induces greater risk-taking by banks but also shows that the relationship between real interest rates and banking risk is more complex. Ultimately, it depends on how much skin in the game banks have. The central message of the paper is broadly complementary to those in the recent MCM board paper “Central Banking Lessons from the Crisis.”

Bank Leverage and Monetary Policy's Risk-Taking Channel

Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez
Bank Leverage and Monetary Policy s Risk Taking Channel Book PDF

Author : Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez
Publisher : International Monetary Fund
Page : 41 pages
File Size : 53,7 Mb
Release : 2013-06-06
Category : Business & Economics
ISBN : 9781484333730

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Bank Leverage and Monetary Policy's Risk-Taking Channel by Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez Pdf

We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.

Monetary Policy, Leverage, and Bank Risk Taking

Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez
Monetary Policy Leverage and Bank Risk Taking Book PDF

Author : Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez
Publisher : International Monetary Fund
Page : 38 pages
File Size : 51,6 Mb
Release : 2010-12-01
Category : Business & Economics
ISBN : 9781455210831

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Monetary Policy, Leverage, and Bank Risk Taking by Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez Pdf

We provide a theoretical foundation for the claim that prolonged periods of easy monetary conditions increase bank risk taking. The net effect of a monetary policy change on bank monitoring (an inverse measure of risk taking) depends on the balance of three forces: interest rate pass-through, risk shifting, and leverage. When banks can adjust their capital structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank's capital structure is fixed, the balance depends on the degree of bank capitalization: when facing a policy rate cut, well capitalized banks decrease monitoring, while highly levered banks increase it. Further, the balance of these effects depends on the structure and contestability of the banking industry, and is therefore likely to vary across countries and over time.

Bank Leverage and Monetary Policy's Risk-taking Channel

Giovanni Dell'Ariccia,Luc Laeven,Gustavo A. Suarez
Bank Leverage and Monetary Policy s Risk taking Channel Book PDF

Author : Giovanni Dell'Ariccia,Luc Laeven,Gustavo A. Suarez
Publisher : Unknown
Page : 67 pages
File Size : 53,9 Mb
Release : 2016
Category : Bank loans
ISBN : OCLC:946890600

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Bank Leverage and Monetary Policy's Risk-taking Channel by Giovanni Dell'Ariccia,Luc Laeven,Gustavo A. Suarez Pdf

We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on banks' internal ratings on loans to businesses over the period 1997 to 2011 from the Federal Reserve's survey of terms of business lending. We find that ex-ante risk taking by banks (measured by the risk rating of new loans) is negatively associated with increases in short-term interest rates. This relationship is more pronounced in regions that are less in sync with the nationwide business cycle, and less pronounced for banks with relatively low capital or during periods of financial distress.

The Paradox of Risk

Angel J. Ubide
The Paradox of Risk Book PDF

Author : Angel J. Ubide
Publisher : Policy Analyses in International Economics
Page : 298 pages
File Size : 46,9 Mb
Release : 2017
Category : Interest rates
ISBN : 0881327190

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The Paradox of Risk by Angel J. Ubide Pdf

The Paradox of Risk contends that central banks' fear of inflation and risk taking has hampered their efforts to revive global prosperity. Ángel Ubide mobilizes a wealth of research on the experience from the last decade, urging policymakers to leave their "comfort zone," embrace risk taking, and take bolder action to brighten economic prospects.

The Economics of Exchange Rates

Lucio Sarno,Mark P. Taylor
The Economics of Exchange Rates Book PDF

Author : Lucio Sarno,Mark P. Taylor
Publisher : Unknown
Page : 344 pages
File Size : 53,9 Mb
Release : 2002
Category : Business & Economics
ISBN : STANFORD:36105025930772

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The Economics of Exchange Rates by Lucio Sarno,Mark P. Taylor Pdf

Table of contents

Monetary Policy Operations and the Financial System

Ulrich Bindseil
Monetary Policy Operations and the Financial System Book PDF

Author : Ulrich Bindseil
Publisher : OUP Oxford
Page : 328 pages
File Size : 41,5 Mb
Release : 2014-09-11
Category : Business & Economics
ISBN : 9780191026454

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Monetary Policy Operations and the Financial System by Ulrich Bindseil Pdf

Since 2007, central banks of industrialized countries have counteracted financial instability, recession, and deflationary risks with unprecedented monetary policy operations. While generally regarded as successful, these measures also led to an exceptional increase in the size of central bank balance sheets. The book first introduces the subject by explaining monetary policy operations in normal times, including the key instruments (open market operations, standing facilities, reserve requirements, and the collateral framework). Second, the book reviews the basic mechanics of financial crises as they have hit economies many times. The book then explains what central banks need to do to when financial markets and banks are impaired to fulfil their monetary policy and financial stability mandates. Besides demonstrating the need for non-conventional monetary policy measures, the book also highlights their dangers, such as moral hazard and increased central bank risk taking. The book draws a number of lessons from the crisis on non-conventional monetary policy operations, assessing what measures have worked well, and how a framework should be designed in future normal times such as to contribute to make financial crises less likely. Central bank monetary policy operations have traditionally been considered as a matter of practice, while the macroeconomic modelling of the transmission mechanism of monetary policy is regarded as a discipline relying on substantial theory ('monetary economics'). However, monetary policy operations can equally benefit from a theory, and from a normative framework to guide policy choices. The limited interest that monetary policy operations have found for many decades in academic economics may well have contributed to the many misunderstandings on central bank actions over recent years. This book provides a basis for a better theoretical understanding of real-world monetary policy operations.

The Regulation and Supervision of Banks Around the World

James R. Barth,Gerard Caprio,Ross Levine
The Regulation and Supervision of Banks Around the World Book PDF

Author : James R. Barth,Gerard Caprio,Ross Levine
Publisher : World Bank Publications
Page : 92 pages
File Size : 46,7 Mb
Release : 2001
Category : Banking law
ISBN : 8210379456XXX

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The Regulation and Supervision of Banks Around the World by James R. Barth,Gerard Caprio,Ross Levine Pdf

This new and comprehensive database on the regulation and supervision of banks in 107 countries should better inform advice about bank ewgulation and supervision and lower the marginal cost of empirical research.

Bank Profitability and Risk-Taking

Natalya Martynova
Bank Profitability and Risk Taking Book PDF

Author : Natalya Martynova
Publisher : International Monetary Fund
Page : 43 pages
File Size : 44,6 Mb
Release : 2015-11-25
Category : Business & Economics
ISBN : 9781513565811

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Bank Profitability and Risk-Taking by Natalya Martynova Pdf

Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.

Risk Taking and Interest Rates

Seung Jung Lee,Lucy Qian Liu,Viktors Stebunovs
Risk Taking and Interest Rates Book PDF

Author : Seung Jung Lee,Lucy Qian Liu,Viktors Stebunovs
Publisher : International Monetary Fund
Page : 47 pages
File Size : 40,9 Mb
Release : 2017-01-27
Category : Business & Economics
ISBN : 9781475572377

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Risk Taking and Interest Rates by Seung Jung Lee,Lucy Qian Liu,Viktors Stebunovs Pdf

We study how low interest rates in the United States affect risk taking in the market of crossborder leveraged corporate loans. To the extent that actions of the Federal Reserve affect U.S. interest rates, our analysis provides evidence of a cross-border spillover effect of monetary policy. We find that before the crisis, lenders made ex-ante riskier loans to non- U.S. borrowers in response to a decline in short-term U.S. interest rates, and, after it, in response to a decline in longer-term U.S. interest rates. Economic uncertainty and risk appetite appear to play a limited role in explaining ex-ante credit risk. Our results highlight the potential policy challenges faced by central banks in affecting credit risk cycles in their own jurisdictions.

Monetary Policy Transmission in the Euro Area

Ignazio Angeloni,Anil K. Kashyap,Benoît Mojon
Monetary Policy Transmission in the Euro Area Book PDF

Author : Ignazio Angeloni,Anil K. Kashyap,Benoît Mojon
Publisher : Cambridge University Press
Page : 398 pages
File Size : 47,7 Mb
Release : 2003-12-04
Category : Business & Economics
ISBN : 0521828643

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Monetary Policy Transmission in the Euro Area by Ignazio Angeloni,Anil K. Kashyap,Benoît Mojon Pdf

A systematic analysis of the impact of European Central Bank monetary policy on Eurozone national economies, first published in 2003.

In Search for Yield? Survey-Based Evidence on Bank Risk Taking

Claudia M. Buch
In Search for Yield Survey Based Evidence on Bank Risk Taking Book PDF

Author : Claudia M. Buch
Publisher : Unknown
Page : 60 pages
File Size : 54,5 Mb
Release : 2016
Category : Electronic
ISBN : OCLC:1306165241

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In Search for Yield? Survey-Based Evidence on Bank Risk Taking by Claudia M. Buch Pdf

There is growing consensus that the conduct of monetary policy can have an impact on stability through the risk-taking incentives of banks. Falling interest rates might induce a 'search for yield' and generate incentives to invest into risky activities. This paper provides evidence on the link between monetary policy, commercial property prices, and bank risk taking. We use a factor-augmented vector autoregressive model (FAVAR) for the U.S. for the period 1997-2008. We include standard macroeconomic indicators and factors summarizing information provided in the Federal Reserve's Survey of Terms of Business Lending. These data allow modeling the reactions of banks' new lending volumes and prices as well as the riskiness of new loans. We do not find evidence for increased risk taking for the entire banking system after a monetary policy loosening or an unexpected increase in property prices. This masks, however, important differences across banking groups. Small domestic banks increase their exposure to risk, foreign banks lower risk, and large domestic banks do not change their risk exposure.

Should Increased Regulation of Bank Risk-Taking Come from Regulators Or from the Market?

Robert L. Hetzel
Should Increased Regulation of Bank Risk Taking Come from Regulators Or from the Market Book PDF

Author : Robert L. Hetzel
Publisher : DIANE Publishing
Page : 40 pages
File Size : 40,6 Mb
Release : 2010
Category : Business & Economics
ISBN : 9781437919523

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Should Increased Regulation of Bank Risk-Taking Come from Regulators Or from the Market? by Robert L. Hetzel Pdf

The heavy losses in bank asset portfolios do not reflect an inherent failure of markets to monitor risk adequately but rather the perverse incentives of the financial safety net to excessive risk-taking. The unsustainable rise in house prices and their subsequent sharp decline derived from the combination of a public policy to expand home ownership to unrealistic levels and from a financial safety net that encouraged excessive risk-taking by banks. Charts and tables.

Risk-Taking in International Politics

Rose McDermott
Risk Taking in International Politics Book PDF

Author : Rose McDermott
Publisher : University of Michigan Press
Page : 256 pages
File Size : 54,8 Mb
Release : 2001
Category : Political Science
ISBN : 0472087878

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Risk-Taking in International Politics by Rose McDermott Pdf

Discusses the way leaders deal with risk in making foreign policy decisions